According to a research report published earlier this year, the global SaaS market is estimated to grow 21% annually over the period 2018 through 2023. The growth in the market is expected to be driven by banking, financial services, and the insurance sectors. Insurance services provider Guidewire Software (NYSE: GWRE) is benefiting from this high growth trend.
For the recently announced quarter, Guidewire’s Q3 revenues grew 15% to $162.9 million, ahead of the market’s forecast of $155 million. Non-GAAP EPS of $0.18 was also significantly ahead of the market’s estimated EPS of $0.08. A year ago, Guidewire had reported an EPS of $0.05.
By segment, license and subscription revenues grew 45% to $76.2 million. Maintenance revenues grew 14% to $21.3 million while services revenues fell 8% to $65.3 million.
For the current quarter, Guidewire expects revenues of $199-$207 million, falling short of the market’s forecast of $226.2 million. It expects to end the quarter with an adjusted EPS of $0.47-$0.53, again falling short of the market’s forecast of $0.60. Guidewire expects to end the current year with revenues of $711-$719 million, falling short of the Street’s forecast of $729.7 million. It forecast an EPS of $1.36-$1.42 compared with the Street’s forecast of $1.38 per share.
The company attributed the miss in the outlook to seasonality and the growing demand of subscription-based revenues that result in revenues being recognized in the subscription period instead of upfront at the time of the sale for term licenses.
Guidewire’s Product and Partner Expansion
Guidewire continued to upgrade its product and partner network to drive market expansion. Recently, it announced that Larsen & Toubro Infotech (LTI) was joining the Guidewire PartnerConnect alliance program as a consulting alliance member. As a consulting partner, LTI will help insurers design and deploy business transforming strategies to reduce time-to-market. Guidewire PartnerConnect Consulting partners provide consulting services for business transformation and strategy and implementation. The PartnerConnect program allows insurers to easily access Guidewire’s Marketplace and offer new solutions while catering to changing market demands.
It also added several new partners for its platform to help simplify the insurance and claims process. Livegenic, a real-time video platform for insurance, and ACI Worldwide, a leading global provider of real-time electronic payment and banking solutions, were added as Solution partners for Guidewire.
Livegenic has created a new plug and play add-on that is available to insurers in the Guidewire Marketplace. The add-on will make it easier for insurers on Guidewire ClaimCenter to streamline their customers’ claims experience with the Livegenic MyClaim App and Customer Portal. The Livegenic MyClaim app integrates a user-friendly interface with an adaptable workflow that helps policyholders document their claims anytime, anywhere. The Livegenic Customer Portal will allow insurers to collaborate with policyholders or field resources and give them the ability to live photo and video stream, capture photos, and directly upload documents.
Similarly, ACI’s Ready for Guidewire accelerator will allow insurers to quickly integrate the Bill Payment solution with Guidewire PolicyCenter, thus allowing them to provide their policyholders with easier ways to make payments.
Guidewire’s platform strategy is helping it drive significant market adoption. Its InsurancePlatform suite has been implemented by companies like Western National Insurance and France-based Groupe BPCE’s insurance arm Natixis Assurances.
Its stock is trading at $102.38 with a market capitalization of $8.4 billion. It had climbed to a 52-week high of $109.06 in May this year. The stock has recovered from the 52-week low of $73.82 that it had fallen to in December last year, when most technology stocks had taken a beating. Guidewire had listed in 2012 by pricing its stock at $13 apiece to raise $115 million. Prior to listing, it had raised an undisclosed amount from investors including U.S. Ventures, Bay Partners, and Battery Ventures.